Pound climbs to one-month high as Trump fears hit US dollar

The pound has climbed to its highest level against the dollar for a month after jitters over Donald Trump's presidency weakened the US currency.

It was up by a cent-and-a half against the dollar to just over $1.2520 by late Monday evening. The pound was also ahead against the euro.

Sterling's strength had earlier weighed down UK-listed shares, leaving the FTSE 100 - after its record-breaking start to January - 0.7% down by the end of Monday's trading at 7151, close to its level at the beginning of the year.

Shares (Berlin: DI6.BE - news) in the FTSE's multinational companies tend to benefit from the weaker pound, as this makes their foreign currency earnings worth more in sterling terms.

The dollar was on the back foot as markets digested the protectionist rhetoric of Mr Trump's inauguration speech.

A weekend of protest and confrontation between the White House and the media, together with confirmation that the US is withdrawing from the Trans-Pacific Partnership trade deal, added to the negative sentiment.

US markets had been broadly cheered by Mr Trump's election, with hopes that an infrastructure spending boost and lower regulation and taxes would lift business.

But Rabobank strategist Philip Marey said the new President's inauguration speech rhetoric "sparked some concerns in the markets that he is going to play hard ball".

Kathleen Brooks, research director at City Index, said: "The initial reaction to the first few days of Donald Trump's presidency suggests that investors may be losing patience with the new occupant of the White House."

She (Munich: SOQ.MU - news) said investors were worried about "protectionism and what a deeply unpopular president will mean for national unity and international diplomacy over the next four years".

The International Monetary Fund has warned that a "destructive" trade war could derail global growth.

It followed Mr Trump's threats to slap punitive tariffs on carmakers in Mexico exporting to the US, as well as confrontational campaign rhetoric over China.

The pound's climb on Monday follows a sharp surge last week - its strongest one-day rise since 2008 - as Theresa May's Brexit speech was viewed as less "hawkish" than expected on the terms of the EU divorce.

But is still 17% down in the wake of the EU referendum in June, whose result sent the currency to its lowest level against the dollar since 1985.